Catcha Digital Berhad (CATCHA) Earnings Call Transcript & Summary

All right. Welcome, everyone. Let me get started. So today, welcome to 2026 Investor Briefing. As usual, I'll be walking through some of the key highlights of the quarter, and then I'll quickly go through the overview of the group for the new joiners then we'll talk about the financials and the operations and other related M&A update as well. If you have any questions, feel free to drop in the comment box first and then we'll address it right at the end of the session. To kick it off, I'm going to start by sharing some highlights for the first half and the Q2 of the year. In first half, our revenue and EBITDA jumped quite significantly by close to 114% in revenue, we achieved about MYR 48 million in revenue in H1. Adjusted EBITDA went up about 80%. And then our PATAMI went up a little bit lower, and we'll go into the detail a little bit more relatively speaking. And also in the same half, most of the contribution comes from our media business. which contributed MYR 48 million revenue and EBITDA went up by close to MYR 12 million. And then adjusted PATAMI went to close to MYR 6.2 million. In Q2 that contributed to H1 number that I just shared revenue up MYR 21 million, slightly below our expectation. And adjusted EBITDA, we achieved about 2.96% slightly down compared to the quarter last year. And then just to put being down a little bit, which will also go into a bit of detail primarily in Q2 and H1, there's still a lot of contribution from our digital media business, both from a revenue and profitability standpoint. And some of you have reached out to me to ask a bit more about the export business and a softer Q2 and Q1 is mostly related to the B2B Expo seasonality where we didn't have any events up until Q3, which all the revenue and profit are all recognized in Q3. So that's kind of the core of it. Those operations, businesses are generally kind of moving as expected. In terms of in Q2, 2 businesses that perform in below expectation was a frame motion with new to the project-based kind of nature where some of the projects are pushed back a little bit to the second half. those are B2B Expo, Q3 is a very busy quarter. So in July, we had our MIB trade fair. This is for our F&B trade show that was in KLCC the company we acquired earlier this year. Also in August, we had a construction trade show under MBM deal. And also upcoming in 2 weeks' time, we will have Agri Malaysia in my tech. In the M&A, if we don't close any new or announcing you in Q2, but we're actively still pursuing quite a lot of opportunities that we're currently looking at. In terms of funding, there's not much update. It's pretty much the same case except we're actively talking to our bank to expand the facilities. In terms of financing method, as usual, we will always prefer cash flow from the listers vendor financing, i.e., the deferred kind of earn-out arrangement is the vendors and then debt. And then finally, the lease pre equity. As at June of our cash balance is about MYR 30-odd million is very healthy right now. this or what's next. We will continue to grow the business. low export revenue earnings is concentrated in Q3, and we expect this full year to be meaningfully better than 2025 as well. Nothing will change that much in terms of what we plan to do is to continue to execute acquisitions, make sure all the deals are funded, right? And then that platform operating CEOs will continue to drive the earnings of the overall group. So I'm going to spend maybe 5 minutes to quickly walk through the history and overview of the slides of the company, as some of you may be new to us. So Catcha Digital was listed in 2011 under Catcha Media Berhad.Over the years, the business has transformed quite a bit. And then in 2017, the disapplied by Media Prima. And subsequently, the new line that you all see today really started in 2023, where we really transform into building a permanent home for market-leading businesses in Southeast Asia. And what that means is that we want to be a few things to provide a few things to win buses and it's not too big for the capital market on its own, and it's too small for the IPO as well. And one of the things that a lot of large plans appreciate a long-term partner that's still with a legacy over the long term. And do you grow the business alongside them and to entrepreneurs and care about continuing to run the business, retain the culture and really pursuing group-wide kind of synergies and opportunities where it makes sense. And third is a -- all the life would be a sustainable growth as strategic partners will provide them not only with financial support, but also credit deal across the board, as a sounding board, connect them to the right people, the expert across the network and provide a finally a path to liquidity for some of the founders and the early shareholders for their life's work. Broadly, what that means is that we really set group into 2 big groups of people. So one is the HQ team, where we are responsible for capital allocation, how we think about financing and the strategy of overall group and some of the subsidiaries as well and making sure the right governance is in place. as for the raincoat the people that drive the business on a day-to-day basis will be responsible for P&L on the bottom line integrate acquisitions that's added on to the business and focusing on growing the business organically. And the OpCo will generate free cash flow for the HQ to invest in, and then we would redeploy it at HQ level into other acquisitions or we invest into other organic growth opportunities that we think is accretive to the company. And in short, what we really try to do is to acquire companies at a good valuation and then scale them through either on growth or M&A depending on the context and then provide guidance and support the best practices, capital and network. And we intend to continue to reinvest the free cash flow into more opportunities either it's organic or inorganic. And hopefully, with that, we will be able to compound the shareholders' value over the long term. And this is a model that is actually quite well-known globally, and some of you may be more familiar than others that we'll continue to walk through what this is modeling. So we did not invent this whole new idea of acquisition-driven compounding strategy is a strategy that has adopted quite widely globally. So it could be a walk-through at primary. So serial acquirer is the term that I guess, globally everyone looked at is essentially in terms of described a company that relies on both programmatic growth on top of our organic growth to grow the overall group. So you buy companies that will continue to grow and then you keep doing that over a long period of time. essentially, it's a holding company that makes acquisition a core and repeatable strategies. And on top of organic growth of the underlying investors typical small and specialized niche systems that we look at, and some will call it pression driven compounders, programmatic acquirers, is not compounded just in general. Here are some of the names that you may be more familiar with like some of the L'Oreal in the athletic space, Electrolux in the electronic space, Berkshire Hathaway, everybody would know here. And then LVMH in the luxury space, ASSA ABLOY in the security solutions space. And we draw this, we map this out and so no one can distinguish the kind of strategy. So what we really are is on the top right corner where we are a lot more decentralized, where operations runs more independently, and we have a couple of sectors. So a parallel will be someone like a Berkshire Hathaway where you have multiple business line and then Opco will generate cash. The HQ and the [indiscernible] would be deploying the capital across multiple opportunities as a comparison. And in terms of valuation, typically, this is a slide to kind of guide the market on how typically global investors will look at other value-add business like ours and typically through EBITDA. So some of these names that you see are on the slides other than our own logo, I consider inspiration for losses and they're trading at 30x to 40x EBITDA and then PE really very well widely depending on the stage of the company, but it goes from 0 to 90x. Some of the more familiar names would be -- there will be serial acquirer in software space Constellation Software that has done 30 acquisitions a year for the last close 30 years. And there's Lifco in Sweden that does about 7 acquisitions a year in multiple niche industrials. And then we have Heico in the aerospace market that acquires 3, 4 companies a year. And then we have Chapters Group that has been acquiring 7 companies a year out of Germany as well in the digital solutions space. And this is a strategy that has been tried tested through the founders of the group, right? So [indiscernible] have been involved in property and cars a buying new strategy across multiple Southeast Asia region, building out some of the top companies. And right now, they drive the Board and the overall strategy of the group. I myself see that level a long time for our investments team which many of you have met as Scott said [indiscernible] is responsible to drive overall M&A strategy. And then on OpColevel of ZK driving imitabusiness, which brings him a huge roexperience across the in the industry over the last 20-odd years. And then Roger from the B2B export side, whom we partnered late last year to build out a roll-up in the B2B exports space.And so far still early days, so it's not overseen by the HQ team. And today, we are a 3-pillar business. So digital media would be a great part of the contributor to our overall group sense at about between 80% and 90% of our business. growing segment, which would establish late last year. And if you're growing as well, now it contributes quite meaningfully to the group. And then so far or on the early stage that we're building out. So in total, the last 5 years, we have done close to 14 acquisitions. And in the last 18 months, we did 8. So things are shaping up and going quite healthily. Some of you may say like you have so many companies to buy. So this is to put things into perspective a little bit. So within the universe that we look at, the 3 pillars that we look at that's already close to 1 million companies that we can look at and this revenue potential of close to $650 billion, and our aspiration does not stop in Malaysia. I know we started in Asia. And if you look across ASEAN is really like $7.7 trillion of GDP contribution to the whole is close to half is like 70 million SMEs out there. But again, our short-term focus will be in our core market, make sure we win and we are disputed #1 before we really looked out to other markets. Last bit on the overview of the group is how we think about financing. So our priority is always going to be free cash flow, i.e., cash flow of the business. and vendor financing, which is basically payment terms that we have with the sellers of the business where we pay over time rather than pay everything upfront. And then we have set up a debt facilities and will continue to utilize it for some of the deals that is suitable and we'll continue to discuss with our lender to continue to grow the debt responsibly. We still have a lot of headroom right now. So we want to get ready for next phase of growth. Hence, we're actively talking to asking our bankers to grow the facility. And then in terms of rights issue, we still have close to actually about $8 million in balance, and we'll continue to utilize this for the upcoming deals. We have warranted that is accessible up to 2029. The or more years before we come up with the expiration that will form part of how we fund and finance some of these acquisitions. And finally, as well as required, which is least preferred, most of the new deals, but the right environment, we may also consider equity placement. So to sum it up, like if you think about us buying 7x across 3 tranches conversion is about 85% cash flow 5% organic growth in some of these businesses, you will generate about 23% of IRS kind of guide. Now I'm going to move into the financial update. So I'm going to talk about our focus a bit more on the H1 on H1 because I think it's a little bit more representative of a better comparison being year-to-date year-on-year. but also touched quickly on Q2 2026. So broadly, I think from a Q2 point of view, the revenue is growing quite healthily across the group, like we did about 60% growth and EBITDA dropped a little bit, I mean it dropped out a lot more, which I'm going to extend a little bit down below. So I'm going to even attention into 3 key points. So one is digital media continues to be the core earnings engine for Q2 revenue up to $20.8 million adjusted 25% to $4.7 million and both contribution from organic growth and newly acquired companies. The margin of the business took is a small hit, but it's mostly because some of the companies we acquired over the last year has slightly lower margins just purely due to different nature of business and taking the EBITDA margin from 30% to 23%. Our core operations, the business set was what you saw a year ago, maintained the margin. So underlying cost business continue to be very healthy. And adjusted PATAMI was held back a little bit by quite a lot of nonoperating expenses by higher minority interests, taxes are higher now, more depreciation from our investments in out of home view board and it's not really an inflection of weaker operating performance. From a export point of view, losses continuing to do because majority of the revenue to be recognized in Q3. So there's no event in Q2. So hence, it's pure loss. All the revenue come in Q3. And because the segment was only established in Q3 last year, so we don't have a comparison from the year before. HQ, we will now continue to be investment cost for us to do the slightly because been more wells infrastructure support and large group to make sure we meet our goals as a group as well. I have got this kind of reconciliation slide from statutory to adjust a number how we look at the business. So in short, there was about $1.3 million of one-off and noncash M&A for Q2, the bridge between the statutory profit to adjusted profitability. But I won't go into detail will be the breakdown has very similar to our interim report as well. So looking into H1 now because I feel like this is a better perspective to all the investors when you compare on H1, given the resource has grown as changed quite a bit and to single out any form of seasonality. Again, similar format as the previous slide in to sites to go in Q2. So H1, actually, across the board, the business has grown, but trying to speed as much as possibility. Revenue was up about 115% year-on-year to $46 million, adjusted EBITDA up close to 100% for the Digital Media business to 11.7 billion gain contribution comes from both organic and inorganic growth, but give or take the business went up about 10% in top line for our organic results from and then the remaining contributed by the companies that we acquired throughout the year. Tastefully and Framemotion has started lower margins. So it took the margin lower to prior year, but the corporations continue to hold the margin. again, adjusted EBITDA up at a lower proportion compared to revenue EBITDA primarily because there's minority interest that we set up to align incentives with the seller, there's tax and depreciation that was not as big compared to the last year. B2B expo very similar to my explanation just now. There were no events in H1, basically means we ecall the fixed costs without our revenue. So the adjusted loss is about 0.6 million. And the second 1 was really only established in Q3. So we don't have like a proper H1 or H1 comparison and all the flagship exports run in Q3, which has happened in July, August, and there's 1 more coming in September. HQ, builout, the same as well as the cost has gone up a little bit to be a better infrastructure to support the overall group. Let me see. We've included a similar reconciliation table. So feel free to go deep into it, but I won't go too much into the detail, but in summary, there's MYR 5.3 million one-off to bridge from statutory to adjusted profitability, of which all are disclosed in quite detail in our interim report. So if you have any questions, feel free to share with us here or share first via e-mail as well. Happy to address any of them. This is the same slide in the last few earnings call. which I would just quickly run the result the adjustment from a more technical standpoint mostly to present how we management and the Board look at the underlying operating profitability of the basics of our model comes with quite a lot of noncash or nonoperating expenses that can be quite that will mask the true operating of the business sense adjusted out to show a better year-on-year comparison. So there are a few things that they typically will look at the adjustments of 1 is the we actually, I think, one-off. So any ongoing accrual into our P&L, we don't explore anything that's ongoing when we exclude out adjust out the one-off, which we did earlier this year for past year's performance, we couldn't do it the previous year due to not obtaining regulatory approval for the whole program yet at the time. Two is anything that's either M&A and financing. We adjust it also we can see like operating performance, how does it perform compared to last year because this has something to do with the operations in a typical one-off. And then 3 is unwinding of interest on deferred consideration is you can think of it as a noncash interest on the future purchase consideration. It is purely an accounting requirement. We like a time value of money. So it's nothing to do with the cash and the excluded so that you don't get kind of mixed up with the actual financing cash obligation and operating results. And then there is also some amortization in intangible said that we acquired business. And based on purchase price allocation, again, this is clearly accounting we do value the intangible assets and amortizing or depreciated in the fees get sense over time and creates noncash expenses to us as we find we that abilities are restructuring or some of our entities and some life gains on losses and it all paper-related numbers that not related to operating performance. So it's adjusted out whether it's positive or negative. This is a modeling menu of kind of explaining what these things are which I kind of did already, so I won't go into too much of detail all this will be available on our website, and feel free to go through. And if it doesn't make sense, you please ask now. So in short, like statutory PATAMI in H1 is MYR 1.7 million. This accounting view of the business. And then we just had a dip. We add back M&A-related financing transaction costs and then some paper interest, intangible asset, and it will sort to be about MYR 3.6 million in adjusted PATAMI. And Berkshire, by the way, has somewhat a similar problem, and I'm trying to screen shorter some of the letter from Warren Buffett why in the U.S., they will look at GAAP core non-GAAP in our case we look at statutory versus adjusted numbers. So now quickly move on to some of the operating highlights with some short videos and then before we close off with the Q&A, as we normally do. This is Tastefully. Tastefully organizes the largest B2C expo in Malaysia and is like a new event launch a new venue that we have never done before. Okay. Just on run through the videos keep some time. So this is, let's say, a glimpse to what Framemotion does. Okay. Mic is back. So this is some of the new things that our media business is doing with launch a few new pages and then we also now experiment with also with one of the more viral host that we recently had in 1 of our accounts. So we're actively exploring using AI to improve deserves in both top line and bottom line point of view incorporate as much of that as possible into our overall positive into our overall business. In terms of H2, the B2B segment will contribute quite a lot financially to the whole group. The 2 quarters of carrying fixed segment costs without events in all the events around against the cost base is already absorbed. So expect to see meaningful contribution in Q3 and Q4 from the export business. quick glimpse of MIB that we just concluded recently that one of the actually most impressive addition in the last 10 years, actually, so quick overview of the policy then so they get a sense of how it looked like, I think I saw some of you at that event. So one interesting fact is also MIB is a whole cohesive the association and the Malaysia Specialty Coffee Association. They organize the largest coffee competition in home Malaysia and the winners is basically only be qualifying round to the World Cup. There has been really big in the market so far. One in National also completed a construction trade show, a slightly smaller scale in August. But nevertheless, so that's the operations update. So next, I'm going to go into brief M&A update. It's not much so they actually just quick glance through all the deals that we've done. The only new one this year is MID, which recently completed in 31st March as part of our One International Group. There will be a few events coming up under the group. So feel free to check out is available on our website or the key dates. And you can get a sense of how the events look like. So Tastefully would have on even in September, on November 1 in December in South Saminin JV, there's 1 JV on coming where's mid value and coming up at Christmas. And then Agri Malaysia is coming up under 1 international banner in September. And then this year, we're launching a new show PCM expo in MyTech in late November, focusing on the B2B tradeshow for traditional Chinese medicine. So that's a new organic launch that we have got. So before I go into Q&A, this maybe round up the year a little bit or the first half of the. So 2, 3 years in building the permanent home for market-leading companies and resource has grown quite significantly across the board. And I think a lot of statutory losses you saw reflects the accounting cost of acquiring quite a lot of businesses rather than the cost of operating the -- this year, we expect the business to -- in terms of revenue wise to double at least to close to double the numbers from last year. The adjusted EBITDA, we expect also close to double just time as well and EPS, we're quite confident that our adjusted EPS or continue to grow meaningfully as well. Those are M&A, we continue to look at us that feed our mandate and feed our strategy by where we are right now is that we are just quite kind of cautious around how we deploy a want to maintain discipline rather than go out gamble and is a place really plan model. We will continue to look at businesses that will help us achieve 20% IRR and cut execute from here. So now I'm going to leave the time for Q&A. And feel free to drop your question into the box here, and I'll take it one at a time.

John asked, can you give some background on the 115.22% tax rate? I think broadly, the reason why sometimes the fluctuation of tax rate is a few things. So one is that we do have customers or companies will collect cash upfront, but the revenue is delivered later. And as a result, in those cases, we actually have to pay taxes first, and we have to accrue the taxes that we pay. So hang sometimes, we will have to pay taxes on revenue we currently recognize. So this will apply in primarily -- actually software and tradeable businesses where we do take cash upfront. So while on a working capital basis, it's very good for us if we take cash out from you have to factor in that we have to pay taxes on those cash and to manage that dynamic. So that's one reason. And two, is that because we have some entity like our HQ cost that is not tax deductible, while some of the operating companies all carry their own costs, cost is quite being weighed on an overall group. So when you consolidate a number as races are paid on an MDD to entity basis, so we consolidate all the whole group, you look like you are paying ridiculous amount of taxes, but some of the reasons because of side, we are loss-making. Hence, it will create that we had 115% tax rate. That said, I think we're actively optimizing wherever as legal and possible to kind of restructure on the cost base to ensure that we're optimizing to pay for taxes that is absolutely necessary and required rather than anything that rather than not doing it at all. So to sum up, one is HQ cost is dragging down like the group effective tax rate. And then two is there some sensors that we have to pay cash -- sorry, we collect cash up front end and tax obligation as assess this on cash collection rather than P&L accounting recognition. So we have that. MacJa, I read some news, some companies got MSC status to have less taxes. Do Catcha Group apply? In some of our businesses that has a relevant tax incentive from relevant department, we always try to get that. So there are some actually in our case that we pay taxes. So we get tax incentive for example, B2B Expo where we do get some trip incentive. So we pay less, a lot less taxes. In the media business, some of the things that we do, we can claim for Texas, especially things and we did more so where possible, we do. And we have 1 company is call today's core Malaysian Digital status. So where possible, we always try to. I think as all businesses, we want to make sure that we capture all the incentives that's given by government as much as possible. So the 40% increase in fuel costs primarily stems from 2 things. So one is we slightly expanded the capacity of investment team. So now we have like 8 companies under the fold, so we need a bit more bench to support the underlying businesses and also to continue to acquire. So this will get I guess the relative increase of these versus our overall group will be a lot smaller compared to past years. So that's one, for us to be able to cover and continue to grow our existing businesses and acquire new businesses. Second is, as we grow the group, we also need a better back office team, and that's the majority of the cost goes to that, such that we can meet a reporting requirement as consolidation of the financials gets a little bit more complicated and we need a better supporting team to run on 27 entities now versus a year ago, we had maybe 8, 9 entities. So that would be the 2 reasons why we slightly increased the HQ cost. So the benefit that we'll see is a clear reporting and churns being able to make the right decisions and continue to grow the overall growth, both from making sure that businesses that we acquire can grow well. And we continue to be able to acquire other good businesses. With that, actually, we still only have like 6 full-time staff in HQ, managing $120 million revenue business. And I think that's kind of how we hold up for games on. So there's no intention to expand the team beyond what is absolutely necessary. Nick asked, should we explain any further M&A costs in upcoming quarters. So this is a little bit trickier for me to answer. There will be on and off some. I can't be advised on the quantum because it depends on many factors, whether we want to go deep in the due diligence, but there will be some M&A costs in upcoming quarters as we continue to assess deals. Some quarters might be a little bit more than others when we have actually executing here but most quarters, it wouldn't be that higher unless we really complete a deal where we need a full-on adviser legal concept to run the deal. So in short, yes, there will be some in upcoming quarters as long as we continue to acquire business, you'll always see that. Jason asked, May Q2 cash flow, there is a net cash received on behalf of third parties with MYR 6.64 million. What is this. So this is a result of our Framemotion acquisition. So when we acquired the business, there were some receivables basically what the client or the previous owner for past year's results. that still come into the business, and those money should actually be given back to the vendor, i.e., the seller, the original owner, the 40% partner that we have now that we are just holding it on their behalf, hence the solid out the link so that it's not remiss these are trying to past year's revenue that is not owned by Catcha and iMedia as a new owner. So it is separate out the line, so it's not very misleading. And these are because some of the customers will pay back to us and then we also wiring out to ones, but they are not -- so that's the whole idea. This money belongs to the on off -- the previous owner of Framemotion and is sitting in frame motions account at the moment. And because it's not right for us to say is our money so singular, it's not resting in there. Yes, John, that's a very good question. So John asked why do we exclude out the financing interest from adjusted timing also central to our strategy, interest recur to finance them also represent actual cost to the shareholders. So I think it's a very fair question today, we decide to adjust it also you can see the operating business because the way financing is kind of centralized at HQ. But what we do plan to do moving forward is to apportion some of this interest back to the respective business. So that on a year-to-year basis, you can see taper the revenue and profitability that's contributed by respective mature segment, but not because we centralized it at the HQ, and we want to show the underlying opening business on a year-to-year basis. we separate out for now. But I think that's a very, very fair question in it's a matter of perspective and how we look at it. Definitely, this is a very good question. I think we discussed this quite extensively internally -- to make sure that that's the right approach. That's the right approach. But we are actively debating how want to kind of move it so that we can see the year-to-year performance. So we may adjust it over time, which we will disclose it as well. All right. I think we're up. So this deck will be uploaded to our website by end of the day, there will be a bit more material appendix. As usual, if you my questions, feel free to contact me by e-mail is eric@catchadigital.com, and I'll try my best to answer your question. Thank you very much, everyone.